What Happened?
As we highlighted in March following its introduction, the New York’s Fostering Affordability and Integrity through Reasonable Business Practices (“FAIR”) Act represents a fundamental transformation of the state’s consumer protection framework, expanding enforcement authority beyond “deceptive” practices to include “unfair” and “abusive” acts. The FAIR Act has passed the legislature and awaits the governor’s signature. The Fair Act will take effect 60 days following its enactment.
Legislative Changes
The FAIR Act transforms the New York’s consumer protection framework by expanding General Business Law (“GBL”) Section 349 beyond “deceptive” practices to include “unfair” and “abusive” acts. The amendments include several critical changes:
Expanded Scope of Prohibited Conduct
The GBL will now include and define three categories of unlawful business practices:
- Deceptive practices: Under the existing standard, deceptive practices include acts that involve misleading or false representations.
- Unfair practices: Under the FAIR Act, unfair practices include acts or practices that cause or are likely to cause substantial injury to consumers, which is not reasonably avoidable and not outweighed by countervailing benefits to consumers or competition.
- Abusive practices: Under the FAIR Act, abusive practices include acts or practices that materially interfere with a person’s understanding of terms or conditions or take unreasonable advantage of a person’s lack of understanding, inability to protect their interests, or reasonable reliance by a person on a person engaging in the act or practice to act in the relying person’s interests.
Broader Protected Classes
The FAIR Act extends protections under Section 349 of the GBL to “businesses and non-profits as well as individuals,” recognizing that “small business or non-profit” entities need protection equivalent to consumers.
Elimination of Court-Imposed Limitations
The FAIR Act makes any prohibited act or practice under Section 349 of the GLB “actionable by the attorney general regardless of whether or not that act or practice is consumer-oriented,” overturning decades of judicial precedent that limited enforcement to consumer-facing conduct.
Enhanced Enforcement Authority
The Attorney General also gains expanded powers to bring actions against any person conducting business in New York, with broader jurisdiction and streamlined enforcement procedures. The Attorney General has the power to enjoin and seek restitution from any person conducting any business, trade or commerce or furnishing a service in New York, “whether or not the person is without the state.”
Why Does it Matter?
Federal Enforcement Vacuum
The legislation emerges as federal consumer protection enforcement has recently taken a sharp turn towards less regulation and enforcement, with states working to fill the gap left by the federal pullback. As the CFPB undergoes significant transition, certain state financial regulators and attorneys general appear poised to step into the CFPB’s shoes. New York’s legislation represents the most comprehensive state-level response to this federal retreat, potentially serving as a model for other jurisdictions. It is also worth noting that in March 2024, the CFPB, under then-Director Rohit Chopra, issued a letter to New York Governor Hochul supporting amendments to New York’s consumer protection laws to address unfairness and abusiveness.
Business Impact and Compliance Challenges
The legislation creates significant new compliance obligations for businesses operating in New York:
- The “unfair” and “abusive” standards adopt federal concepts but apply them more broadly, creating uncertainty about compliance boundaries.
- The law creates liability for the first time for “unfair” and “abusive” acts and practices while abrogating case law limiting the scope of the statute to allegedly consumer-oriented deception.
- Removal of the “consumer-oriented” limitation means B2B transactions, internal business practices, and commercial relationships now face potential enforcement actions.
What Do I Need to Do?
In reviewing customer-facing and business-to-business practices against the new “unfair” and “abusive” standards, industry participants should bear in mind that the broad definitions require analysis beyond traditional deceptive practice frameworks.
First, despite federal changes, consumer protection compliance remains crucial, particularly as state enforcement intensifies. Companies should:
- Ensure compliance policies address the broader unfair and abusive practice definitions;
- Train personnel on the expanded standards;
- Enhance monitoring systems for the broader range of prohibited conduct; and
- Review and ensure documentation protocols for business practice justifications. The “unfair” standard includes a balancing test considering “countervailing benefits to consumers or to competition.” Companies should document legitimate business justifications for practices that might otherwise appear harmful.
Second, New York Attorney General Letitia James has been actively leading multistate coalitions on consumer protection issues, suggesting coordinated enforcement strategies. With CFPB enforcement curtailed, New York’s expanded authority makes the state a primary regulatory battleground. Financial institutions should expect heightened scrutiny of:
- Fee structures and disclosure practices;
- Lending practices and underwriting standards;
- Customer communications and marketing materials; and
- Digital platform interfaces and user experience design.
Third, the legislation’s focus on addressing “new and emerging technologies” suggests that companies should pay particular attention to:
- Digital platforms and user interface design;
- Data collection and usage practices;
- Algorithmic decision-making processes; and
- Subscription and recurring billing practices.
The FAIR Act represents a significant shift in the consumer protection landscape, with New York positioning itself as the primary regulatory authority as federal enforcement retreats. Businesses should assess their practices against these expanded standards while preparing for a more aggressive state enforcement environment. Other states are considering similar legislation, suggesting this may represent a broader trend requiring multi-state strategic planning. For example, California has introduced legislation to broaden its already robust and aggressive California Consumer Financial Protection Law to expand the authority of the Department of Financial Protection and Innovation to enforce consumer financial protection laws.
Companies operating in New York or considering New York operations must develop comprehensive compliance strategies that address not only the immediate requirements of the FAIR Act but also the evolving landscape of state-level consumer protection enforcement.
The elimination of traditional limitations on enforcement scope, combined with the broad definitions of unfair and abusive acts or practices, creates both compliance challenges and strategic opportunities for businesses that proactively adapt to this new regulatory environment.
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